Regional Reports: Region 10

Kirk A. Lilley
Preston, Gates & Ellis, L.L.P.
Seattle, Washington
Kirkl@prestongates.com

Region 10 Wins Alaskan BACT Battle
EPA Region 10 went home with all the marbles in a recent Ninth Circuit case against the state of Alaska. The decision, State of Alaska v. U.S. Environmental Protection Agency, No. 00-70166/69/75, 70301 (9th Cir. July 30, 2002), deals a blow to independent decision-making by states implementing the PSD program. The case grew out of a disagreement between the Region and the Alaska Department of Environmental Conservation (ADEC) over a BACT determination for diesel-fired generators at the Red Dog mine near Kotzebue, Alaska.

ADEC issued a PSD permit to the mine operator, Teck Cominco Inc. (Cominco), to modify one of six diesel generators and to add a seventh. ADEC initially concluded that BACT for NOx emissions from the generators was selective catalytic reduction (SCR), but later agreed to accept Cominco's proposal to instead install low-NOx burners on all seven generators. This would have resulted in lower overall NOx emissions from the seven generators, but emissions from the new and modified units would have been higher than if they used SCR controls. ADEC accepted the Cominco proposal as BACT and issued the permit - over an EPA order to withhold issuing it.

EPA viewed the state's action as a violation of PSD, taking the position that the PSD rules do not allow for the kind of flexibility the state exercised. EPA argued that the PSD rules require ADEC to look only at the new and modified units, applying the top-down BACT methodology to those units only. EPA concluded in a letter to ADEC - which the Court quoted with approval - that: "the PSD program does not allow the imposition of a limit that is less stringent than BACT even if the equivalent emission reductions are obtained by imposing new controls on other emission units."

In language that will surely make the short list of quotes used by EPA lawyers, the court stated: "we hold that the EPA has the ultimate authority to decide whether the state had complied with the BACT requirements of the Act and the state SIP."

The court also agreed that two administrative orders issued by the Region fell within EPA's enforcement and oversight authority. EPA had issued an order to ADEC to withhold issuance of the permit, and a second order to Cominco preventing the company from commencing construction on the new generator until resolution of the BACT issue.

Washington Gets Full PSD Delegation, Finally
Earlier this year the Washington Department of Ecology (Ecology) and Region 10 signed a new PSD Delegation Agreement granting full PSD delegation status to Ecology. For years EPA retained jurisdiction over the NOx increment in Washington, requiring Region 10 to co-sign all NOx-related PSD permits issued in the state.

In removing the "partial" from Washington's PSD delegation status, EPA added a couple other interesting delegation-related requirements. First, responsibility for conducting all PSD applicability determinations and preparing all PSD permits statewide is given to the Technical, Information and Engineering Section (TIES) of Ecology. Local air agencies and other Ecology offices are now required to confer with TIES staff on PSD applicability issues, and TIES staff are committed to conferring with Region 10 on tricky applicability issues.

The delegation agreement also requires Ecology to "follow all PSD policy, guidance, and determinations issued by EPA for implementing the federal PSD program." And further, "where no current EPA policy or guidance clearly covers a specific situation, Ecology shall consult with the EPA Office of Air Quality on its proposed interpretation of the EPA regulations."

Second, "to assist EPA in carrying out its responsibilities under … the Endangered Species Act," Ecology is required under the agreement to: notify the U.S. Fish and Wildlife Service and/or the National Marine Fisheries Service within 5 working days of receipt of a complete PSD permit application; notify applicants of the potential need for ESA consultation if the project "may affect an endangered species" or "may affect essential fish habitat;" and "[r]efrain from issuing a PSD permit until EPA has notified Ecology that EPA has satisfied its obligations, if any, under the ESA."

Brief Thoughts on NSR Reform and the Pacific Northwest
When, and if, EPA publishes final rules implementing NSR reform, it will likely be even longer before any benefits are realized in at least two Northwest states. In Washington, state law requires BACT for all new and modified sources, not just those with increased emissions over a "major" threshold. So, for instance, even if a project qualified for an exemption from review under NSR reform rules, it would still potentially trigger the BACT requirement under state law.

Oregon, on the other hand, has almost the opposite situation. Oregon's air permitting rules already incorporate many of the innovations being considered by EPA. For instance, the showcase of EPA's reform proposals has been the Plantwide Applicability Limit (PAL) concept, which allows changes to a facility that can be accomplished within a pre-set plantwide emissions cap. Oregon has long incorporated the cap concept with its Plant Site Emission Limit (PSEL) rule, which served as a model for EPA's reform considerations. Due to other unique aspects of the Oregon program, it's unclear as to what benefit, if any, NSR reform will offer Oregon sources. It will be interesting to see whether or not EPA requires states like Oregon with their own approved programs to revise their rules to make them consistent with new federal rules.